The attractiveness of the power project market

Kuwait

Ibrahim Sattout, partner at ASAR, talks to The Energy Year about the role that the firm plays in the Kuwaiti oil and gas sector and the attractiveness of the country’s market for power projects compared to others in the region. ASAR is a full-service corporate and commercial law firm in Kuwait with an office in Bahrain and connections throughout the GCC.

What role does ASAR play in the Kuwaiti oil and gas sector?
ASAR has been involved in several major projects in the Kuwaiti oil and gas sector, acting as local legal counsel for the K-companies and their counterparts in construction, structuring, renewable energy and high-profile corporate and finance transactions. In terms of renewable energy projects, ASAR has advised one of the K-companies on the development of the Al Dibdibah PV solar IPP [independent power producer] project and is currently advising another K-company on an ongoing renewable energy plant project.
ASAR has also provided legal counsel to foreign and local lenders, including European and Asian ECAs [export credit agencies], in bilateral and syndicated financing deals worth billions of dollars, such as the KNPC’s KWD 3.1 billion [USD 10 billion] financing of its Clean Fuel Project, KIPIC’s KWD 2.3 billion [USD 7.5 billion] financing of its LNG project and billion-dollar deals backed by SACE and Nexi.
Additionally, ASAR has advised some of the K-companies on several corporate structurings, including KIPIC’s business and corporate structuring. Overall, ASAR plays an important role in the Kuwaiti oil and gas sector by providing legal services to the K-companies and their counterparts in various projects and transactions.

How important is the segment of advisory for energy companies in Kuwait?
The segment of advisory for energy companies is quite important in Kuwait. This is due to the fact that the Kuwaiti government, such as the Ministry of Electricity & Water & Renewable Energy, the Kuwait Authority for Partnership Projects and the K-companies are the key players in the energy market in Kuwait, and there is an increasing interest in renewable energy in the country.
As advisors, our role is to employ pragmatic skills, legal knowledge and creative thinking to efficiently structure these projects, while navigating the regulatory complexities and complying with existing laws, which include the PPP [public private partnerships] law of 2014 and the IWPP [independent water and power project] law of 2010. In addition, we play a crucial role in identifying and mitigating regulatory risks that may arise in case of legal breach or failure to obtain the required project approvals.
This explains and justifies our involvement in most of the IWPP projects in Kuwait, whether as advisors to the government or the sponsors/contractors. Therefore, the segment of advisory for energy companies in Kuwait is critical to ensure the success and sustainability of energy projects in the country.

How attractive is the Kuwaiti market for power projects vis-à-vis the rest of the region?
The attractiveness of the Kuwaiti market for power projects vis-à-vis the rest of the region depends on various factors such as the country’s energy demand, regulatory framework, political stability and access to financing. Kuwait has a high energy demand due to its growing population and industrial sector, which presents opportunities for power project developers.
However, the lack of projects in the energy sector in recent years (as only one project reached financial close in 2014) may indicate challenges in the regulatory framework or access to financing (i.e., in terms of bankability of the projects. In comparison to other countries in the region, such as the UAE and Saudi Arabia, which have implemented successful renewable energy programmes and attracted significant investment in the sector, Kuwait has been relatively slow in adopting power projects (including renewable energy). This could make it less attractive to investors looking for opportunities in the power and energy sector.
That said, the new Kuwait Vision 2035 provides for a targeted increase of the share of renewables in the electricity generating capacity mix from the current percentage of 1% to 15% by 2030. This shift towards renewable energy reflects a global tendency, and makes sense for Kuwait given its substantial solar and wind resources. In addition, the recent appointment of transaction advisors for three IWPP projects, Az Zour North 2 and 3, Al Khiran 1 and Shagaya Renewable Energy Park, and the potential for further development in the sector could signal a renewed focus on attracting investments in the energy sector.
Overall, the attractiveness of the Kuwaiti market for power projects will depend on how successfully the government can address any regulatory or financing challenges (particularly in terms of the registration and perfection of security rights that the lenders (particularly foreign and international lenders) expect to receive), and create a conducive environment for investment in the sector.

What are the trends driving the IPO and M&A market in Kuwait?
While during 2022, most of the IPOs have been in Saudi Arabia and the UAE, we are witnessing a significant increase in M&A and IPO transactions in the Kuwaiti market, which is likely to continue to grow in the coming years. There have been four IPOs between 2021 and 2022, and we are aware of at least one to three more IPOs in the pipeline for the year 2023.
The rise of IPOs is being driven by several factors, including the market appetite and availability of capital due to economic factors such as high oil prices. As for ASAR’s involvement, our firm has advised on Jassim Transport & Stevedoring’s IPO in 2021, and we are currently advising on two of the upcoming IPOs.
Given the rise in the number of IPOs in Kuwait, last November, ASAR organised a seminar on IPOs and competition law given the interrelation between the two topics. The seminar was a huge success, particularly since the executive director of the CPA (Competition Protection Agency) was a key speaker. We thought it was important to have interaction between the audience and for the CPA representatives to ensure that everyone gains a better understanding of the new law and its implications.
Since this was a new law in Kuwait, it was necessary to provide insights on the new competition regulations, how they affect business activity in Kuwait, the Kuwaiti courts current judicial approach in dealing with CPA disputes and how to address the grey areas in the new law. Our speakers explored the profiles of IPOs in Kuwait, the factors behind the increase of IPOs, the listing rules and the application and offering process.

What is the key competitive advantage of ASAR?
Our firm is one of the largest and oldest (with more than 30 years of experience) in Kuwait, combining local and expat lawyers. The key competitive advantage of ASAR is our extensive experience and expertise in Kuwaiti law and business practices. This is evidenced by our long history in the market, involvement in the drafting of laws, handling most of the landmark transactions in the country and providing assistance to foreign investors in establishing presence in Kuwait including through the KDIPA [Kuwait Direct Investment Promotion Authority].
Additionally, the stability and consistency of our team with a track record of successful transactions is also seen as an advantage and confirms our deep understanding of the local legal landscape. Overall, ASAR’s combination of local and expat lawyers combined with their experience and understanding of the legal ecosystem in Kuwait positions our firm as a valuable resource for clients seeking to do business in the country.
In 2022, to maintain our competitiveness, we increased our marketing and promotional efforts to emphasise our unique strengths and specialisations, and further organised major seminars on key laws in both Kuwait and Bahrain. Thanks to our talented lawyers, promotional efforts and the trust of our clients, which we have earned after decades of hard and high-quality work, we are confident that we will continue to succeed in the competitive legal market in Kuwait.

How can ASAR contribute to Kuwait’s Vision 2035?
Our firm is committed to Kuwait, and we are excited about the strategic vision and the potential benefits it could bring. Diversifying and expanding the economy can indeed attract more investors and stimulate market competition, leading to more growth opportunities. It’s also important to stay aware of economic trends in neighbouring countries and to learn from their successes and failures.
Ultimately, the success of any economic plan depends on effective implementation and ongoing evaluation to ensure that it continues to meet the needs and goals of the country and its people.
For this purpose, our firm’s main objective is to remain at the forefront of the legal services in the market and to remain the counsel of choice for the major Kuwaiti businesses and international clients, as well as the preferred local partner of most of the highly regarded international law firms.
As we have advised on all of the IWPP projects in Kuwait, commencing with the Az Zour North phase 1 IWPP project, Az Zour North phases 2 and 3 and Al Khiran phase 1 IWPP project, Al Abdaliyah ISCC [integrated solar combined-cycle] power project and the privatisation of the Shuaiba North Cogeneration Power Plant with the Supreme Council of Privatization, our objective is to build on the experience gained from these projects and expand our involvement in the area of energy project development and financing.

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